Land for money
Land acquisition fund puts gaming on fast-track

By Kathy Helms
Diné Bureau

WINDOW ROCK — P Morgan Chase apparently isn’t the only game in town when it comes to financing a casino. Three banks have anted up since Navajo Nation Controller Mark Grant was told last week by Budget and Finance Committee to look for alternative financing opportunities.

But the most attractive investment offer — one which is accessible immediately and promises a significant rate of return to the Navajo Nation — has come from the Nation’s own Resources Committee in the form of $35 million from the Land Acquisition Trust Fund.

Grant told B&F Tuesday morning that there are currently two options for financing the Churchrock casino project: One is the banking option; two is the land acquisition fund.

“We have a response from three different banks right now. They’re not solid; we’re still talking with them. However, they have responded immediately and, in fact, some of them have reached out to the Nation without us asking for any proposals from them,” he said.

The Nation has received calls from four other banks which Grant said he still needs to get back with and set up a meeting.

As opposed to the 125 percent cash collateral requested by JP Morgan, discussions with the three other banks involve unsecured revolving lines of credit. “At this point we’re not discussing a bond issue, but that’s not off the table either,” Grant said.

“All the banks we’ve talked with at this point have said they are comfortable with the Navajo Nation’s financial statements and that the Navajo Nation is financially secure and financially strong. They are aware that the Navajo Nation has never defaulted, that the Navajo Nation is good to their word when we get a bond or when we get a loan.”

Regarding option two, Grant said he and B&F Chairman LoRenzo Bates met last Thursday in Cove with the Resources Committee and at that time the committee voted 7-0 to support the B&F Investment Committee to make a direct investment of $35 million into the Navajo gaming enterprise from the $66 million Land Acquisition Trust Fund.

Bates said Resources Committee has authority over land acquisitions, while the Investment Committee has authority over investments. The action approved by Resources is an investment.

Grant said that during the discussion with Resources, “they indicated that they would like a return of approximately 11 percent. The reasoning behind it is the long-term, historical rate of return on the Land Acquisition Trust Fund is about 8 percent, and so they wanted a little premium over that.

“When we have an opportunity to change the rate of return from 8 percent to 11 percent, that’s very significant,” he said. “You would not have that ability to make that type of return in the marketplace unless you go into a very significant high-risk investment, and that would be hedge funds, private equity, venture capital, things of this nature.”

Casino development is fairly well established in the United States, especially Indian casinos, he said. “It is probably not as high risk as private equity or venture capital, so for that reason, I believe that it is a prudent investment by this committee and by the investment committee”

B&F Vice Chairman Leonard Chee said he was more interested in Option 2 because “I see that we as a nation, the Navajo Nation, we’re all helping each other with money, whereas Option 1, we’re just making the banks richer.”

There is no prepayment penalty with the land acquisition fund, Grant said, adding that with approval from the committees and the Navajo Gaming Enterprise, theoretically, the Nation could take the land acquisition money and start construction of the casino tomorrow.

“And then when we get a loan from bank A/B/C, we’ll pay back the Land Acquisition Trust Fund, make it whole again, and then go to lower cost financing.”

Resources Chairman George Arthur said his committee had some specific positions, including setting a timeframe of six months for in-house financing with the $35 million. “If nothing happens within six months, this goes away. That gives some incentive for the people who are pushing for the gaming facility.”

Michelle Dotson, speaking for Navajo Nation President Joe Shirley Jr., told the committee, “President Shirley has been kept apprised of the plan to utilize the Land Acquisition Trust Fund, and while he believes 11 percent is high, he has rationalized that it is an investment in Navajo and he fully supports it.

“He extends his appreciation to both Budget & Finance Committee and the Resources Committee for considering the options, for keeping the eye on the ball with respect to Churchrock, and knowing that we want to try to keep things in line with respect to timeframes.

“He’s very appreciative of that, so he does support the use of Option 2 to initially get things rolling for Churchrock,” Dotson said.

Robert Winter, Navajo Nation Gaming Enterprise CEO, told the committee that of the options presented, “The most viable is the land acquisition fund ... I would like a lower interest rate, but things are as they are.”

He said the enterprise expects to go out to bid on a general contractor in mid-February, “but we can’t enter the contract until we are sure that we have sufficient backing and funding to complete the project. So it is essential at that point in time that we have something in place by mid-February, end of February.”

B&F’s Bates said, “Navajo wants a return on its money as soon as it can get it, and this is one way. And it sets the tone for future borrowing for Navajo. It allows for those concerns that are out there, outside of Navajo, to be addressed in what we do as a Nation.”